It?s been a mixed year for investors in Aviva (LSE: AV) and Standard Chartered (LSE: STAN). That?s because, while shares in the former have made gains of 16% year-to-date, the latter is down 8% since the turn of the year. Despite this, both appear to offer growth at a very reasonable price. Here?s why.
On the face of it, both companies appear to offer great value for money at their current prices. For example, Aviva currently trades on a price to earnings…
It’s been a mixed year for investors in Aviva (LSE: AV) and Standard Chartered (LSE: STAN). That’s because, while shares in the former have made gains of 16% year-to-date, the latter is down 8% since the turn of the year. Despite this, both appear to offer growth at a very reasonable price. Here’s why.
On the face of it, both companies appear to offer great value for money at their current prices. For example, Aviva currently trades on a price to earnings (P/E) ratio of 11.1, while Standard Chartered’s shares are also cheap at their current price level. They trade on a P/E ratio of 11.3 and, with the FTSE 100 currently having a P/E ratio of 13.8, there appears to be substantial scope for an upward rerating of both stocks.
However, when the two companies’ growth prospects are taken into account, they appear to offer even better value for money. That’s because the two companies are expected to increase their bottom lines by 10% next year, which is above the market average. It means that, when combined with their P/E ratios, Aviva and Standard Chartered have price to earnings growth (PEG) ratios of just 1.1. This indicates growth is on offer at a very reasonable price and means that there is considerable upside potential.
Certainly, neither company is without its problems. Aviva, while in a much better position than when it cut its dividend in March 2013, is still in the process of streamlining its business and making its operations more efficient. Although clearly moving in the right direction, this will inevitably include some lumps and bumps along the way. In addition, with dividends still being below their pre-March 2013 level, Aviva yields just 3.2% and this may disappoint some investors. The upside is that with profit set to grow at a rapid rate, dividends per share look set to increase by 15% next year.
Meanwhile, Standard Chartered has endured a tough 2014. Profit was down 20% in the first half of the year and a fine was agreed with US regulators recently, with sentiment being very weak as a result. Unlike Aviva, it offers a 4%+ yield that is set to also grow at a brisk pace, with the bank having the potential to benefit from an improved macroeconomic outlook for the Far East over the longer term.
The future for the two stocks, though, looks very bright and they could turn out to be star performers. Indeed, with a potent mix of growth potential and low valuations, Aviva and Standard Chartered appear to be two great value growth plays that could make a positive contribution to retirement portfolios moving forward.
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Peter Stephens owns shares of Aviva. The Motley Fool UK owns shares of Standard Chartered. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.